Think Outside the Box with SBA 504 Loans

When conventional financing isn’t readily available, it’s time to think outside the box. SBA 504 Loans oftentimes mitigate many of the obstacles that prevent a commercial loan approval.

SBA 504 Loans Remove Common Barriers

Credit risk

Industry exposure

Special-use properties

Liquidity issues

Non-typical businesses/industries

Pending balloons

504 Benefits?

SBA 504 loans are attractive to borrowers because they offer a great opportunity for fixing occupancy costs with a long-term, fixed-rate loan and a minimal down payment. More and more borrowers are seeing the upside to buying their properties, or refinancing into long-term, fixed-rate loans, while interest rates are still low.

Low down payment (10% in most cases)

Low, fixed interest rate and long loan term

Payment stability

Includes soft costs (furniture, fixtures and fees)

Preserves working capital

Protection from balloon payments

Can include leasehold improvements

Think 504 When…

Concentration issues at the bank could be an issue

A balloon payment is coming due

A business is buying real estate as part of a business acquisition

An owner wants to sell his/her share of real estate to the other owners

The real estate to be purchased is a single-purpose property

The business needs to finance heavy machinery or equipment

The business is looking to add multiple locations

The business could benefit from a low 10% equity injection

A 25-year loan could help manage a borrower’s operating capital

New 25-Year Maturity Option

And, new this year…25-year fixed rate 504 loans. The 25-year option conforms to all the familiar guidelines of the traditional SBA 504 Loan Program. It can still be used for the purchase of land or buildings, building improvements or the purchase of equipment and will still feature a fixed rate based on U.S. Treasury bonds, with a down payment as low as 10 percent.

Improved cash flow is of vital interest to all businesses, especially those served by the 504 Loan Program. The longer maturity option is a vehicle that can serve that purpose. If you have questions about 25-year loan debentures, or want to get a better idea of how utilizing this new offering could be beneficial, please contact us.